Capitulation of a new BTC miner?  5 things to know about Bitcoin this week

Capitulation of a new BTC miner? 5 things to know about Bitcoin this week

Bitcoin (BTC) is gearing up to emerge from a dismal November just above $16,000 – what could be on the menu for BTC price this week?

At a time of what analyst Willy Woo called “unprecedented deleveraging,” Bitcoin is far from off the hook after losing more than 20% this month.

The impact of the FTX implosion remains unknown and the warning signs continue to pour in even after the first wave of crypto firm bankruptcies.

Particularly this week, eyes are on miners, who are seeing their profits squeezed by falling spot prices and soaring hash rates.

Upheaval is in the air, and if another “surrender” among miners occurs, the whole ecosystem could suffer another shock.

As “peak pain” looms for the average hodler, Cointelegraph takes a look at some of the major factors affecting BTC/USD in the near term.

Bitcoin miners must ‘capitulate’ – Analyst

Like others, Bitcoin miners see major pressure when it comes to selling the accumulated BTC for a profit.

Exactly how much the average miner is suffering financially remains to be seen, but a classic metric is preparing to be called “surrender” once again.

Just months after the last such period, Hash Ribbons warns that conditions are once again becoming unsustainable.

Hash Ribbons uses two moving averages of the hash rate to infer conclusions about miner participation in the Bitcoin network. Crossings of trend lines indicate capitulation and recovery phases.

For Kripto Mevismi, contributor to on-chain analytics platform CryptoQuant, the time is approaching for the former to reappear.

“So right now the difficulty of bitcoin is really high for miners, which means; costs are rising and doing business in this type of environment is becoming increasingly difficult,” he wrote in a blog post:

“That’s why the miners don’t work in full. If they have efficient next-gen mining machines, they turn them on, but that’s it. Inflation is high and people are feeling the effect of the cost of living, the price of bitcoin is decreasing, the cost and difficulty of mining are increasing. Challenging environment for miners.

Bitcoin hash tape chart. Source: LookIntoBitcoin

Kripto Mevismi added that a significant change in mining difficulty could improve the situation.

BTC.com estimates for the next adjustment on December 6th place the difficulty at 6.4% at the time of writing. If this materializes, it will be the largest such drop since July 2021.

BTC.com and others also believe the hash rate is falling from record highs as miners go out of business.

Overview of the fundamentals of the Bitcoin network (screenshot). Source: BTC.com

BTC/USD Eyes Volatility at Monthly Close

BTC/USD managed to avoid large weekly losses during the last candle close on November 27.

At around $16,400, the weekly close was a bit higher than the previous week, with the pair still circling two-year lows, according to data from Cointelegraph Markets Pro and TradingView.

BTC/USD 1 week candle chart (Bitstamp). Source: Trading View

With a lack of volatility characterizing intraday price action, traders and analysts remain cautious about where to go next.

“It’s a long holiday weekend, so expect things to get interesting as we head into the weekly and monthly close,” on-chain analysis resource Material Indicators wrote in part of a tweet last week.

A later post reiterated that the November 30 close would likely trigger further instability, with BTC/USD currently down 21.25% from the start of the month.

This makes November 2022 Bitcoin’s worst November since its previous bear market year in 2018, data from Coinglass confirms.

BTC/USD monthly returns chart (screenshot). Source: Coinglass

On shorter timeframes, popular Crypto trader Tony, meanwhile, Underline $16,000 as a key area to retrace for higher levels to enter next, keeping in mind the longer term trend.

BTC/USD annotated chart. Source: Crypto Tony/Twitter

“Lower highs and consolidation below a major resistance area. If you want to enter safely, wait for a reversal of the lows,” he said. abstract at week-end.

BTC/USD annotated chart. Source: Crypto Tony/Twitter

As Cointelegraph has widely reported, the next low in Bitcoin’s bear market is currently the talking point of the moment, and some targets have become more popular than others.

A voice commentator calling for further downside, Crypto’s Il Capo, reiterated his view that $12,000 could be next for BTC/USD.

Highlighting the relationship between perpetual futures trading volume and spot price, he warned that the current market structure was not conducive to further gains.

“12000-14000 is likely. 40-50% downside for altcoins,” he pointed out.

Under the Bitcoin Sea, hodlers are piling up

Big or small, the population of the Bitcoin ecosystem is “aggressively” adding to its exposure to BTC this month.

A positive sign of a future supply squeeze – where demand comes up against more of the illiquid supply – accumulation appears to be accelerating.

According to on-chain analytics firm Glassnode, it is retail investors who are primarily responsible for the current trend.

Small investors, variously referred to as “crabs” and “shrimps” depending on portfolio balance, are growing in number.

“Bitcoin Shrimps (<$1BTC) added $96.2k BTC to their holdings since the collapse of FTX, a record balance increase. This cohort now holds over $1.21M BTC, or 6.3% of circulating supply”, Glassnode show in a Twitter thread about the phenomenon.

Bitcoin shrimp net position change chart. Source: Glassnode/Twitter

Another post noted:

“Crabs (up to $10 BTC) also saw their balance increase by $191.6k BTC in the last 30 days. This is a compelling all-time high, eclipsing the July 2022 peak of $126,000 BTC/month.

Bitcoin “crab” net position change chart. Source: Glassnode/Twitter

As Cointelegraph reported, part of the rise in smaller wallets could be due to exchange users withdrawing funds to private storage.

Woo signals incoming “peak pain”

For Willy Woo, the analyst behind popular statistics resource Woobull, the on-chain metrics indicate Bitcoin’s next macro low is imminent.

By highlighting three of them over the weekend, Woo showed that for all intents and purposes Bitcoin is behaving exactly as it has in the pit of previous bear markets.

The portion of BTC supply held at an unrealized loss, for example, is approaching macroeconomic lows, a phenomenon covered by the “Max Pain” model.

“Bitcoin’s bottom is approaching under the Max Pain pattern. Historically, the price of BTC hits macro cycle lows when 58%-61% of the coins are underwater (orange). Green shading fits rooms locked inside GBTC Trust,” Woo Explain next to a chart.

Annotated Bitcoin Max Pain chart. Source: Willy Woo/Twitter

Continuing, he noted that the MVRV value for BTC/USD is also targeting a “buy” zone, which has historically given investors maximum profit potential.

MVRV is the market capitalization of Bitcoin divided by the realized capitalization – the aggregate price at which each Bitcoin last traded. The resulting number delivered buy and sell zones corresponding to extreme prices.

“The MVRV ratio is deep inside the value zone,” comments Woo declared:

“Beneath this signal, we were already at lows (1) until the latest FTX white swan breakout brought us back into a buy zone (2).

Bitcoin MVRV annotated chart. Source: Willy Woo/Twitter

Woo’s third chart, Cumulative Value Days Destroyed (CVDD), was recently covered by Cointelegraph.

“Use these charts at your discretion, we are in a period of unprecedented deleveraging,” he added, warning that “past cycles do not necessarily reflect future cycles.”

Macro mood rocked by protests in China

Some key economic data from the United States is due this week, but crypto analysts are more focused on China.

With an already fragile status quo hanging on inflationary trends, unrest in factories around the world could disrupt market performance, some warn.

China is in the throes of a wave of protests against the government’s policy on COVID-19, with several cities defying lockdowns to demand an end to “COVID zero”.

With that in mind, risky assets could take a beating if things got out of control.

“Bitcoin’s crucial zone could not break, so we continue to consolidate in this range. In support now”, Michaël van de Poppe, founder and CEO of trading company Eight, Explain:

“If this is lost, I would expect further lows to be seen in the markets, likely depending on the contagion from China and FTX this week.”

Even mainstream media warned of the potential repercussions that day, with John Toro, head of trading at Exchange Independent Reserve, telling Bloomberg that “high contagion risk is profiled in the cryptocurrency complex.” .

Asian stock markets fell slightly on the day, with the Hong Kong Hang Seng Index and the Shanghai Composite Index down 1.6% and 0.75% respectively at the time of writing.

One-day candle chart of the Hang Seng Index. Source: Trading View

Bonus: Bitcoin Funds in Crude Oil

On a related macro note, Bitcoin is now in line for an “outperformance” against US dollars, a well-known analyst has said.

Related: Bitcoin May Need Another $1 Billion in On-Chain Losses Before New BTC Price Drops

In terms of WTI Crude Oil, BTC price action is already at macro lows – and the story calls for a resurgence, which includes a significant uptrend against the USD.

“We are finally at the bottom of the channel”, TechDev confirmed during the weekend:

“Bitcoin’s crude oil (energy) purchasing power peaked in April 2021. It now looks poised for another round of outperformance (and rising USD value).”

BTC/WTI annotated chart. Source: TechDev/Twitter

An accompanying chart drew specific parallels to Bitcoin’s performance at the bottom of the last bear market in late 2018.

As Cointelegraph reported, TechDev is far from the only bullish voice to characterize BTC price action at the start of the new year.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.